Choppy Waters Demand a Strong Skipper: a Case Study · Choppy Waters Demand a Strong Skipper: a Case Study . 27/28th January 2016 . Steve Francis – Turnaround CEO . CHC Chief Executives’

Choppy Waters Demand a Strong

Skipper: a Case Study

27/28th January 2016 Steve Francis – Turnaround CEO

CHC Chief Executives’ Conference, Miskin

Steve Francis - Bio

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• Successful Danwood turnaround. Nominated for 2015 CEO of the Year • CEO/ CFO for complex operational turnarounds with turnover £100m-£2bn. • Experienced in large operational transformation/ restructuring involving financial distress or

change of ownership. Former roles include: – Group CFO/ MD, Vion Foods UK (£2bn turnover), UK’s largest meat producer – Group CFO and former Member of the Management Buy-in Team at Vita Group (£1bn

turnover), an international plastics manufacturing conglomerate • Former McKinsey consultant and partner of PwC • Banking career including MD and Head of Corporate Finance Advisory at Barclays Capital • Member of Advisory Board of CRESC and contributor to several publications. Recently gave an

open lecture to Manchester Business School on “Where Next for British Business? A Return to Traditional Values after the Casino Days”

• Former Visiting Professor and Advisory Board member at Oxford University Business School

CHC Chief Executives Conference – 27/28 January 2016 Steve Francis

ABOUT DANWOOD: UK’s #1 Independent Managed Print Services Group

36,000+ Average number of support

centre calls per month

100,000+ Machines in Field

£195m Revenue

The UK’s largest, most influential, multi-brand channel partner in the world

25,000+ Average number of tech

visits per month

3,000+ Number of different device

models currently being supported

2,000+ Combined years of

engineering experience

The largest professional

services team in the UK

within our industry

3 CHC Chief Executives Conference – 27/28 January 2016 Steve Francis

ABOUT DANWOOD

We service SIX BILLION pages per annum

Stacked as reams this would exceed the

height of Everest every week

Laid out it would cover the City of

London every 4 months

Equivalent to 268 acres

of forest every year

Would use up 50,000 sq ft of

office space or 113TB of

Storage


Danwood: Before and After

October 2012: • Growth through acquisition • Unprofitable: high costs/ manual

systems • Running out of Cash • Small Family Business grown Large

(1,800 employees) • Fragmented structure: Regional

Baronies, poorly controlled & inward-looking

• Old-fashioned Ways/ Untrustworthy

• Reactive Service • Knowledge in Individual heads;

little focus on IT backbone • Many legacy issues

September 2015: • Strongly profitable, well-invested • Clear Direction & Strong Governance

& Values • Legacy issues with customers

decisively resolved • Clear UK focus • A few Deep Partnerships • An Integrated Business delivering

Consistent Service • Industry Leading Management • Functional Excellence – Outward-

looking • Continuous Innovation • Big Data/ Knowledge-driven; Cloud-

based


Danwood Status: October 15th 2012 – Appointment of new CEO

• Group Finance Director left in June 2012, replaced by interim CFO • 3rd delay in publication of overdue 2011 Audited Accounts; PwC’s first audit into its 9th month • Group’s banking facilities in default and the banks (Barclays and RBS). Now handled by their

“work-out” teams • A “whistle-blower” investigation by Deloitte’s forensic accounting team underway, initiated by

the Board, triggered by allegations about accounting and contracting irregularities • Relations between Board and Chairman/ CEO/ founder (Colin Daniels) were strained due to

missed profit targets • On October 15th 2012, the PE backers made some decisive changes:

– New Non-Executive Chairman appointed and took on relationships with Banks and auditors – New CEO, Steve Francis, appointed with responsibility for introducing “a more professional

management regime”, if possible working with the founder – Both set the task of stabilising the business urgently – CEO asked to “professionalise” the group.

What Type of Leadership Was Needed?

• Bias to Action. Rapid fact-based assessment & decisive actions. Confidence to act quickly • Creativity. Step-changes in Complex, Ambiguous Situations requiring new angles, insights and

innovative new business models. Happy to challenge orthodoxy. “Steve has been like a Lawrence of Arabia in this role”, former #2

• Calculated and Methodical Risk-Taking. Emphasis on rigour and quality in execution. Analytic, quantitative, financially-literate: clear structure/ process, accuracy, detail

• Preference for “Trust & Delegation” to “Control” but err towards Centralised Controls initially • Strong Values/ Ethics. Unshakable business & personal values. Belief in highest standards of

governance. Instil strong values and clear accountability as a foundation stone • Working in Teams. Build teams and coalitions at pace • Results-focused, “getting stuff done” • Be Relentless but Consultative; Care about your team; Spot strugglers and Develop them.

Empathy rather than sympathy.

Press Reports during the Early Months

FOUNDER AND CHAIRMAN OF DANWOOD SACKED The founder and chairman of the Lincoln firm Danwood has been sacked. His employment with the company was terminated this week after he was suspended along with three other senior directors. A spokesman for the Whisby Road business said 3 Other Senior Directors would remain suspended until the conclusion of "due process". The office printing equipment supplier has not revealed the circumstances behind the suspensions or why Mr Daniels was removed from his post. Lincolnshire Echo, January 23rd, 2013 DANWOOD BOOKS £20M LOSS AND RESTATES 6 YEARS’ ACCOUNTS Danwood Group has been forced to restate its accounts for the last six years after uncovering "accounting irregularities" relating to Managed Print Services (MPS) contracts. Ernst and Young, who had been the group's auditors since 2008 and who signed off its original 2010 accounts, were replaced by PricewaterhouseCoopers (PwC) on 25 October 2011, following a review during which PwC identified the accounting irregularities. Print Week, January 14th, 2013

Press Reports during the Early Months [Continued]

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FOUNDER AND CHAIRMAN OF DANWOOD SACKED Troubled print biz lost £8.5m in fiscal '12 Danwood's exec team has completed a review of operations including "contract documentation" this month. It began the review in September 2012 when a whistle-blower blew the lid on dodgy book-keeping practices spanning fiscal 2005 to fiscal 2010. This discovery forced the group to restate its numbers for the six years ending fiscal 2011, which it refiled in January this year, showing a near £17m drop in sales and £8.5m less in operating profits. The "accounting weaknesses" (PDF) admission and subsequent review, initiated by private equity backer Bregal Capital, saw the departure of founder and chief executive Colin Daniels, who resigned in January to be replaced by Stephen Francis. Bloodletting at Danwood was not confined to the chief, with the wider sales force also made to pay for the mistakes of the few at the top. Channel Register, May 28th, 2013

• Teamwork, Openness, Transparency

• Partnership & Mutual Trust

• Love our Customers before Profit, Know them Better

• Discipline, speed & efficiency

• Develop, Train, Inform and Empower Our People

Danwood Values – Foundation of the Turnaround & Recovery

Overview of a Turnaround: Danwood Group 2012-15

Winter 2012: First 50 Days

“Take Control”

Jan-May 2013: “Stabilise & Plan”

June 13-June14 Profit Turnaround

June 14-Summer 15 Re-birth

Overview of a Turnaround: Danwood Group 2012-15 - i




• Install new governance and reinforce strong values, improved reporting; “New Danwood”

• Strong cash management, delay payments – manage liquidity daily/ continuously

• Institute temporary, conditional amnesty – “Lance the Boils” • Suspend majority of Executive Board including Founder/ install external

replacements • Produce Heavily Qualified 2011 Audited Accounts “Worst in the Firm this

year” – PwC. Questions on going concern…..


“Take Control”

Overview of a Turnaround: Danwood Group 2012-15 - ii


• Emergency cost reduction (<£10m pa.), reduce salesforce by 50% - get to

trading cash break-even (500 person salesforce cut in half) • Centralise management & controls, dismantle old regional “Baronies”,

remove layers of senior management • Review all major customer contracts, continue investigation of legacy issues,

further suspensions and dismissals • Build “Fragile Coalitions” of stakeholders and management – “Brutal

Openness”; “Keep Your Nerves” • Publish clean, unqualified 2012 Audited Accounts

Overview of a Turnaround: Danwood Group 2012-15 - iii


“Take Control”



• Cash injection to fund exceptional and legacy costs - £8m.; Refinance bank debts

• Secure Customers and Contracts, Build Trust with all Stakeholders • Centralise and Modernise Service Delivery, Fix Unprofitable Customers &

Contracts (“Shrink to Health”) • Reduce Back Office Costs, Property Costs • EBITDA back to £1m per month (historic high % EBITDA margins), 30%

improvement in productivity in 18 months June 13-June14

Profit Turnaround

Overview of a Turnaround: Danwood Group 2012-15 – iv Rebirth


“Take Control”




• New Sales and Marketing Leadership, Streamlined Management team • £8m investment in Cloud-based “Big Data” systems & analytics across

12,000 customers: “i-Danwood” • Grow Organic Sales via Campaign-driven OEM Partnerships • More Joined-up Danwood/ OEM Major Deal Business Development

Processes • Industrialise & Automate the Customer Renewal/ Retention Life-cycle

STRONG, STRATEGIC SUPPLIER RELATIONSHIPS

Meeting with Dr Inamouri, Founder of

Kyocera, Oxford, June 2014

Presenting at Samsung’s New Product Launch in Monaco,

February 2015

With Canon Global Leadership, Tokyo, June 2015

With Samsung Global Leadership, Korea, November 2014 Receiving a Partner Award from

Xerox Global Leadership, Miami, May 2015 With Ricoh Global Leadership,

Tokyo, June 2015

Building strong and strategic Supplier partnerships was at the heart of Danwood’s strategy Detailed Joint Business Planning driving Competitive Advantage

DANWOOD WINS SPECIALIST RESELLER OF THE YEAR AT CRN AWARDS

• Reseller awards recognise excellence in the delivery of solutions, service and support to end user customers, taking into consideration the reseller's ability to deliver real benefits to the user organisation, and to meet customer objectives in terms of improved efficiency, ROI and investment protection, and cost reduction.

• Our entry focused on the ‘new Danwood’ and used Yorkshire Building Society and Thomas Cook as customer testimonials.

• CRN is a multi-channel newspaper (print, web & mobile) providing news and commentary on the technology industry.

Danwood wins! Specialist Reseller of the Year Recognition across the technology industry and our peer group. Danwood rated #11 out of 55 in CRNs top Value-Added Resellers – ahead of Dixons, Annodata and Dimension Data, and only 8 places behind BT!!

Recent Press – Summer 2015

CEO FRANCIS EXITS STAGE LEFT Hauled half-dead print services biz back to black The CEO brought in by Danwood’s backers to extinguish the financial flames that resulted from half a decade of systemic mismanagement and dodgy bookkeeping practises, has exited. Steve Francis, the self-proclaimed serial turnaround expert has left the building in far better shape than he found it in October 2012 when the print services provider reported a loss of £21m. The exec said he joined at a “point of crisis”, following the discovery of accounting errors that forced Danwood to restate six years’ worth of financials. Francis overhauled the structure and senior team. Chairman Bob Ellis pointed out that after work undertaken, Danwood returned to the black in fiscal ’14, and has resolved the “remaining inherited legal and contractual issues” with customers. “The remit for which Steve was engaged is now complete,” he said in a canned statement. Control of the organisation has been passed to chief operations officer Wes Mulligan, who was one of the early recruits made by Francis. Channel Register, September 1st, 2015

Messages at Conclusion of Turnaround, September 2015

Dear Steve Gosh , you must be longing for a damn good rest after 2 years 10 months ! You built a team , generated energy , determination , self-belief and enthusiasm , whilst simultaneously leading the complete rebuilding of Danwood to the stage where the endeavour certainly will be remembered as a model, highly successful ‘ turn around ‘ . You set examples of decency , honesty and integrity and reminded Danwood’s employees ,customers and suppliers what is a proper business and how it should earn and deserve loyalty and support . Well done for achieving such a huge transformation in a very short time . With my best wishes Adam Hackett, former Group Sales Director, Danwood

Documents

Choppy Waters Demand a Strong Skipper: a Case Study · Choppy Waters Demand a Strong Skipper: a Case Study . 27/28th January 2016 . Steve Francis – Turnaround CEO . CHC Chief Executives’